right now on oa, when there's little money moving sideways in the mark, look to where money sits in the banks. then thinking of setting up an apple options trade before the big iphone event next week? well, don't. we've got a wiser apple alternative play. finally, a look back two for one deal on our recent consumer staples plays in hormel and

kroger. best way to cash in coupons on both. i'm melissa lee. this is "options action" live. on the desk, mike khouw, carter worth, and brian stutland. as rates close out a losing week, the financial sector trailing further behind. carter think that's indicative of a larger theme. carter? >> regional banks have been the worst. j.p. morgan has been the best. but bkx index and larger banks all struggling. brokers, they're making all-time relative highs to the bkx the the kre. on an absolute basis they look to be rolling over. let's look at a chart or two. we're going to stick with morgan stanley. the first thing to note is it's essentially the same price it was in 2000. if you have a stock that's gone sideways for 20 years, that means adjusted for inflation you've lost about half your money. every year you lose about 2.5%.

that's pretty unhappy. let's zero in closer. this is the trend line in effect since the covid low. we have converging trend lines. one could say your era was wrong, carter, i think it's going to break out. i think it's right, it's going to break down. let's go shorter term and wrap here. what we have is that line is in play. do we breach -- it is to be fair a series of higher lows since the lows of about a year ago. i think we're going to break. >> mike, do you agree with carter's assessment? and what's the trade here? >> yeah, so let's just talk about the space first. what's kind of curious about the group, if we're just talking about the banks of brokers -- big ones would be goldman, j.p. morgan, so on. just on a historical basis, their valuations don't look terribly expensive. probably looking at something in the neighborhood or of ten or 11 times the earnings. if you take a look at the news

that's been coming out of these companies basically since june, almost every one of them has been announcing a head count reductions. so we've got job layoffs -- we heard that at schwab, citi, heard that from u.p.s. they're trying to digest the -- and j.p. morguen and goldman sachs. to be fair -- >> mike, sorry to interrupt, we're having some issues with your audio so we're going to have to try to get that straightened out before you lay out the trade because we want to levels loud and clear to the audience. brian, what's your take on carter's assessment? he mentioned the arrow could go up but think it's going to down. do you agree? how are you feel about the brokers? >> yeah, i think some of the banks and the major brokers have really been a trade where they're kind of stuck in the mud, and i think that wedging channel that you're seeing that carter brought up is a real potential that if the market goes south, some of these

brokers could break to the downside. morgan stanley being one of them. what i would say about big players in the major financial sector is one thing we like to do is trade structure notes with them. that's a fancy word for saying selling a downside put or vice versa, telling an upside call. we think there are pretty good premiums. the fed could come to the rescue on downside risk in any names. selling a downside put makes sense. in something like morgan stanley, sell where the cap is topped off, looks good. 90 days out, providing relatively good annualized returns over or near 15%. i think when something is sort of just stuck in the mudder maybe has the potential to go to the downside, it makes sense, taking premium. >> mike, i think we've got you back, got the audio issues

straightened out let's give it a whirl. that's the trade here? >> sounded like brian may have been alluding to it. what i was taking a look at was selling an upside credit call spread and using morgan stanley that expires before they're reporting earnings which they do in the third week of october. specifically looking to the october 6th weekly call spread. you want to try to avoid those catalysts. that's when stocks get rerated, repriced and you can see basically all of that premium come in your favor or go immediately against you. also, don't try to chase, you know, high premiums, essentially. you want to try to look for situations where you're range bound neutral to bearish when you do these types of trades. >> carter, you mentioned the regionals are the worst. any hope for them since the stronger banks are rolling over in your view? >> i don't think so. let's just say -- one could say, well, there's no downside. okay, let's see that point to

the other side. but what is the upside? it's always about that. investing is risk, it's managing that. what is it that's going to make banks right here and now get up on their feet and start outperforming? i just do not see it. the largest financial in the financial sector is berkshire hathaway. they're making all-time highs. there's a reason for that, because it's highly defensive. that's an anti-market kind of thing. >> mike, last word to you. >> as i was saying before, and maybe you guys heard this, maybe you didn't based on the audio issues. you don't typically see an industry en masse laying people off when times are good. that's just not the pattern. doesn't seem, baseden their actions, like things are really good, which suggests the cheap valuations we're seeing in these stocks are steep for a reason, because they are below historical averages. >> let's turn to one of the bigger movers. that would be apple. the tech titan souring nearly 6%

this week, but there could be a better alternative in the software space. carter peering into his crystal ball for this one. or maybe the charts. >> we're going to look at some other old world names, but for fun let's get right to it. let's do fundamentals to put this in context. it's not clear if apple is a growth stock or value stock. apple has been out s&p 500 growth or value stock. sometimes it's growing, sometimes it's not. take a look and you'll see this is kuwait a stunner. on a ten-year basis, 2013 to 2023, look at the difference between, of course, the shares outstanding and look at the multiple. basically you have had earnings growth, you have had revenue growth they're all very modest. the share price is what's moved. it's simply a buyback machine. there isn't anything impressive other than multiple expansion, and up to this point we're starting to see it in the charts. let's look at two relative charts. we looked at these earlier in

the week. the last week in september a year ago, apple puts in its relative peak. apple's up 14%. the tech sock to have is double that at 30%. you could have brought broad com up 60%. so many other choices. the opportunity cost has been a disaster. the final chart is the same relative chart. the final chart, it's a ratio, we're breaking trend. topping out apple over the past year has been a bad pick. >> wow. mike, what's your take on this? >> yeah, it's interesting, talking about the buybacks. ten years ago, the company essentially bought back 5% of its outstanding shares and each year since, the the. in dollar terms has either been flat or declining. the value of the company has been increasing. what that means is as a percentage of the company, they're buying ever smaller and smaller amounts of it back. the impact of the buybacks is going to diminish as that takes

place. i get the point that carter is making. using essentially the tremendous cash flow that the company has been generating, and nobody's denying it has been a cash flow generating scheme to buy back shares is diminishing over time. >> with all that said, brian, people might be looking for a better trade and you have one in oracle. >> if you're looking to move out of apple, oracle is one of those place. it's also a play where if you have had high flying names, such as tech sector, i'm looking to rotate into a safer tech bet, and oracle is one of those. we have earnings coming up here. when i look at the charts, stock had a big run. to me i get this feeling, can i bite here? am i just chasing it? but i think they're going to have good earnings here. we're seeing double digit growth for cloud applications. they have a play in the a.i. world, not to mention, obviously, their continuing

customers they have and will have. by them becoming a bigger and bigger player in the cloud provider, i think they are taking over this world and you get an a.i. world play with them. i think, though, if i'm here to just try and buy this stock, i think there's a lot of risk. there's a big catalyst event coming um. earnings, i want to be safer when i first go to buy this stock. i think you can use call spreads to do that. they're a little pricey, but the earns move big enough. we've seen the stock, it's been a few quarters till it moved significantly to the downside. have seen move to the downside a couple years ago. there is some risk when step in before an earnings event i think the call spread in this situation, where i'm looking for the 125/145 call spread. buy 125. sell a 145 call against it to lower my cost. s this going to you can pyre. going to give it time to run to the upside. going to november. break everyone, 131.34. profit all the way up to.

will be called away from the stock at that level. i think 145 is my price target. willing to be called up at that level. i think there's room to run. this is a call spread to get into a stock trading at an all-time high. for everything "options action" check out our website and newsletter. much more "options action" after this.

welcome back to "options action." another tech name out with earnings next week. adobe, stocks surging, up nearly 57%. if you think of photoshopping this one out is a good idea, think again. mike's got a way to play it. mike, what's the answer? >> adobe is one of our holdings, and one of the reasons, or two of the reasons for that is they are really at the intersection of a couple secular tail winds that i think are quite important. one of those is of course digitization. we're talking now about the fact that -- this was accelerated by remote work, where increasingly moved to digital work. the you think about how that

impacts people, just imagine something like docusign. their equivalent is e-sign. that's a big benefit. another is social media creators who use a lot of their products, including things like krcreativ cloud. we're talking about people creating videos on youtube and elsewhere. they create the software they use. that's a benefit. if we're taking a look at enterprise spending there's caution there. kind of like the oracle situation that brian was talking about before, this is a company that's had a heck of a run, up more than 60% year to date. it is trading at a slight premium to its historic multiple. probably trading around the 515, 520 area. if you don't obama the stock but want to be long going into a catalyst -- and as we were mentioning before, the time to look at things like call spreads, which is the trade we're going to articulate here, you want an identified catalyst.

we have one in the form of earnings. i was looking at buying a call spread. it's a high dollar stock, something important to remember. 550, 560 bucks. i was looking at the november 565, 625 call spread. that's going to be a decent outlay of premium. an important point for people looking to reduce the amount of premium, one way you can also do that is by tightening up those strikes. essentially you have less reward, but can lay out less premium. that's one of the things you face when you're dealing with options on stocks that cost $500, $600 a share. >> carter, what do the charts look like? >> year to date performance is arbitrary. if we're sitting here in january, year to date is arbitrary. what's important is where you are in relation to where you have been. apple covered all of its losses and made new highs, but it's faltering, where as oracle covered losses andis making new highs. adobe has yet to make it back

the highs. i think you play this for a catchup. we might have a comparative chart to make this point. as a matter of technique, you either go away real winner in playing relative strength. that would be oracle, or double back and find a laggard like adobe. the one in the middle isn't interesting. that's apple. >> brian, what's your take? do you like this one, too? >> i do, and i like the length of the strikes that mike picked here. when you look at earnings prior, 5% is norm for a stock to move after earnings. that could put you all the way to the upside strike, which might be short after this. after earnings short trikes start to lose volatility, start to lose premium after the event is over. i like the distance between strikes. you have to have more stomach, it's a high priced stock, but using the -- to play to the call side, that all-time high to get back to that level, seems look it could hit that. up next, look backs as

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welcome back to "options action." last week we told to you skip the spam and laid out a bearish trade on hormel. the stock dipped nearly 4% since then, putting this one in the green. carter, what do you make of this price action? >> pretty bad. staples have taken a hit as a group, things like hershey, general mills, but this one is under particular pressure. the setup, this stock quadrupled the performance of the s&p on a 50-year basis. has a majority shareholder, hormel foundations, almost 50%. but it's losing all of the luster of that period. my hunch is it's not over. i would continue to be a seller if you're long and if you're a short seller, retain the trade.

>> all right. we've got a bonus look back for you. kroger jumping better than expected after this morning, updating investor on albertson's deals news. >>. mike, you laid out a trade that you says has an easily repeatable strategy. >> the strategy we talked about was a buy right or covered right if you already own the stock, which is a situation where you sell upside calls to basically collect some premium along the way. one of the thing wes often discuss is whether or not it's advisable to sell calls with catalysts going into earnings. sold a call prior. now that catalyst has come and gone, and we've gotten other news out of kroger. announced that opioid settlement, which i think is good, it's important to get that potential obstacle out of the way. another obstacle they faced was anti-trust concerns with respect to the merger with albertson's

and there they're looking at a significant investment and hopefully getting that across to the finish line. for those reasons i still like the stock, but i also think this is one of those things where i'm not expecting any explosive price action to the upside. this is steady as she goes. a yield play i think you can look to sell additional upside call against the stock that you done. >> would do you that, brian? >> yeah, in fact, i was taking a look, you look around the $48, $49 strike, which is the top channel this is in, and go out maybe towards the end of the year, there's decent premium to be left after the earning event is over with. i'm a little less afraid of getting called away too soon and instead seeing the stock settle in underneath that and collect premium on that. go a couple months out, look at that $49 strike areas an area. >> what do you think of kroger, carter? >> pair of 2s. >> ooh. >> if everything else is bad, it's a good hand. everything else is better, pair

of 2s, not so good. up next, final call. "options action" back in two. you ok, man? the internet is telling me a million different ways i should be trading. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah! it's time to take control of your investing education. cut through the noise with best-in-class education resources that match your preferred style of learning. learn your way. not theirs. td ameritrade. where smart investors get smarter℠. the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

it's our new set, first "options action" from this set. welcome back. it is time to take some questions. our first fan asks, is uber in a cup and handle pattern? if so, how would you play it? what do you make of this assessment, carter, of the charts? >> i suspect on a short-term basis, that's exactly what the pattern is. a couple things about it. one, we know that it's ipo prices at $42. we've finally gotten a backup of that, from may of 2018. its relative performance lyft is at a relative low. youtuber, play with options or

sell the stock. >> do you also like uber, mike? >> yeah, i do, actually. this was -- both uber and lyft, i think uber has obviously demonstrated they have been doing things a little better of late. but i think this is one two stay long here. >> let's move on to this one. this is a stock everybody asks about. nvidia. second fan asking thoughts about puts on nvidia. brian, your take? >> yeah, i mean, the seasonal trader in me says we're in for choppiness in the partings. nvidia being a high flier is one to undergo that, so i would buy puts. so that i can stay in this stock, keep it long, use a put spread to protect it. there's been a lot of rumors around nvidia cooking the books, denying that. i don't know if it's true or not.

i think we're in choppy waters. >> how does that chart look, carter? >> key is it made no forward progress since its earnings beat. it was a popular number, but there was no follow through in the price. at this point stall is the word that comes to mind, so i would take measures. >> it's not just consolidation. >> up down or sideways cover 100% of the odds sideways or down gets you about 98%. >> this is our last one. i had a lot of success with amazon put credit spreads but my brokerage holds on to the max amount. is there a way to avoid this with an options set up or collect interest? >> there isn't really. really you have to think about this, there's two things. tough margin requirements, which are regulatory, and then of course what your broker is going to impose. the interest is going to vary from broker to broker as well. right now i'd be reluctant to sell given the run we have had. >> all right, time for the final

call. quickly, carter. >> sell goldman sacks and morgan stanley. >> brian? >> buy a call spread in oracle. you guys look good in the new set. >> thank you. >> mike khouw? >> call spreads in adobe. all right, that does it for us here on "options action." we'll be back next friday. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now! hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you money. my job isn't just to entertain but to teach you. call me at 1-800-743-cnbc. or tweet